Fund Manager Partnerships

Richwood’s Basic Rationale for Selection of a US Fund Manager - What Works for You?

1. Your objectives
Before drawing up a shortlist of potential managers, sit down and decide what it is that you want to achieve from your real estate portfolio and how much risk you are willing to accept in pursuit of those goals. Selecting markets you want to invest in, setting a target return and deciding on broad risk tolerances will quickly discount numerous incompatible managers from your search.
2. Specialist manager
Your manager represents your interests and makes decisions on your behalf in the marketplace. They are your agent and should understand and share your core beliefs and mirror how you conduct yourself. Real estate investment can open you up to reputational risk if, for instance, tenants make money from activities you do not wish to be associated with. Look for a manager with a similar attitude to corporate social responsibility as yourself.
3. Track record
Once you’ve decided on the “where” and the “how”, you’re ready to move onto the next question, “who?”. One of the most important selection criteria is that the manager should specialize in your chosen investment strategy. A jack-of-all-trades manager is interesting; however, in our experience, specialists have better market and occupier contacts which allow them to source better deals and keep tenants happy.
4. The team
By this stage the managers you are weighing up will have a long and credible track record in your target markets implementing an investment strategy similar to the one you would like to pursue. The next stage is to meet the team and get comfortable with the people who will be managing your assets on a day-to-day basis. The best teams are appropriately qualified, located in the markets in which they claim to be experts, and enjoy working together. Better asset management decisions are made by managers who know their clients’ properties like the back of their hands. High staff turnover statistics are bad for business!
5. AUM
When it comes to assets under management, some make the mistake of assuming that bigger is better. Whilst a certain level of AUM ensures that the manager is competent and experienced with a solid business, too many clients and properties to look after can mean that corners are cut and opportunities to add value are missed. Before you sign on the dotted line make sure your business matters to your manager.
6. Cultural alignment
Your manager represents your interests and makes decisions on your behalf in the marketplace. They are your agent and should understand and share your core beliefs and mirror how you conduct yourself. Real estate investment can open you up to reputational risk if, for instance, tenants make money from activities you do not wish to be associated with. Look for a manager with a similar attitude to corporate social responsibility as yourself.
7.  Corporate governance
The right manager should have a robust and tested corporate governance structure. No matter how brilliant an individual fund manager might be, the strategic ideas should be reviewed and approved by a panel of industry experts prior to being implemented with your money. Checks and balances ensure that only appropriate risks are taken to deliver your target return. Investigate how the manager decides which client portfolio an asset is allocated to. Make sure policies and procedures are in place to guarantee you would be treated fairly in a competitive bid process alongside potentially larger clients (which could be more lucrative for the manager).
8. Fees
Fees should be appropriate in the context of your manager’s market and investment strategy. Choosing the cheapest man for the job may prove in the long run to be a false economy, so consider what a manager is providing for their fee and compare relative value rather than absolute fee levels. The fee you are charged should be used to incentivize the people who work on your portfolio rather than swallowed up by the corporation that they work for. Don’t be afraid to ask your manager how their employees are incentivized and retained, and make sure strong performance is rewarded.
9. Accountability
Your manager represents your interests and makes decisions on your behalf in the marketplace. They are your agent and should understand and share your core beliefs and mirror how you conduct yourself. Real estate investment can open you up to reputational risk if, for instance, tenants make money from activities you do not wish to be associated with. Look for a manager with a similar attitude to corporate social responsibility as yourself.
© 2020 Richwood Capital Partners Asia Ltd.